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Thursday, November 28, 2013

The Concept Of Residual Income

The Concept Of Residual Income
By Paramendra Bhagat (www.paramendra.com)

There is a famous book called Rich Dad, Poor Dad by Robert Kiyosaki. Most financially literate people have heard of it. In it he pushes forth the concept of residual income, not his original idea. It is a difference in worldview.

There is the job mentality, and that is perhaps 99% of the people out there. You get a good education to get a good job with a good company. The income might be 20,000 dollars or 200,000 dollars, but that income is still linear. If you don’t show up for work, the money stops coming.

Nothing wrong with jobs. Jobs are how most people pay their bills, put food on the table. Jobs are wonderful things, but there is something beyond jobs. One has to be open to possibilities.

There is business ownership. Upendra Mahato might be flying around the world on NRN activities, but he is still making money at that time, because he is a business owner. Nobody says, but he did not even show up for work, let’s stop paying him. Why? Because he built something and put it into motion.

But then Upendra Mahato might be a bad example with which to highlight the concept. Because pretty much everybody would dismiss that example. How many Laxmi Mittals can the planet produce? Only so many. Even launching a restaurant with an initial investment of 200,000 dollars is beyond the reach of many people.

But then you might have seen small business owners who quite literally are always working. That can also put off some people. Where is the residual income in that, you might question. Also, it is not easy to start a business, it is not easy to sustain and grow a business, it is not easy to keep the lights on. A lot of businesses end up folding. People with the job mentality point that out. But look, they say.

Residual income is money showing up even if you don’t show up, because you built something and put it in motion. Residual income is you making money even when you are fast asleep because you put something in place and put it in motion. Residual income is being able to pass a business to your next generation. You can’t pass on your job to your son or daughter.

With a job you have only 24 hours, and chances are you are working eight, 10 or maybe 12 of those hours, some even manage 16. But it can never be beyond 24. That probably is the biggest limitation of linear income. Also, one person can acquire only so many skills. One person can only become so good with the skills he or she has.

But if you build a business team that has 10 people on it, you have 240 hours in a work day. If your average team member puts in 10 hours, you have a 100 hour work day. Chances are 10 people will make more money than one person. And 10 might not be your ceiling. Maybe you will take your team to 100, to 1,000, perhaps to 10,000. A job owner’s hours in the day are limited. But there is no limitation to how big a business owner’s team can be. And the 10 people on your team might have complimentary skill sets. Person A can do what person B cannot or does not have the time for.

Beyond residual income is a related concept: the concept of financial freedom. You have attained financial freedom when there is no longer a connection between what you do with your time and the money you make. You could be playing golf and still be making money. You go on vacation whenever you want, as often as you want. You spend a ton of time with your family, because that does not hurt your income stream anymore. Business ownership does not guarantee you financial freedom, but it is a vehicle that can take you there if you work hard and smart.

I feel like everyone who makes that conceptual jump and understands the residual income idea will go ahead and get started with network marketing. Robert Kiyosaki is a huge fan of network marketing. It beats job ownership, he says, and it beats small business ownership. But it has been amazing to me to see how easy it is to misunderstand this very simple business. People’s minds fly off on tangents. To many people to go from a job ownership mentality to a business ownership mentality is almost like changing religions. There is this huge inertia. They resist. They fight back. They come up with excuses. They rationalize their choices. You mean all that schooling I did was a waste? No, it was not.

Every time you watch an ad anywhere for products you buy and services you consume, know that you are paying for those. You just don’t see it that way. All network marketing does is it takes all that ad spend and give it to people like you who build a network to generate business volume. That is a hugely empowering concept. Sometimes I wonder if it took 10,000 dollars instead of 500 more people would do it, more people would take it seriously.

Those good at it have bothered to put in the effort to go through tremendous personal growth. I know someone who after a year of work is making 10,000 dollars a week. He has a good year every month.